Stocks up, economy down

By Fred Goldstein

Economic activity in the United States shrank by 6.1 percent in the first quarter of 2009. That made this the worst recession in 50 years, with three consecutive quarters of sharp economic decline. The decline was worse than predicted by economists, who had projected 4.7 percent.

Yet the stock market continued to surge right past this news. Why? Because investors seized upon a slight growth in housing purchases and construction.

There is one capitalist economy in the United States. But there are two basic classes in society—the bosses and the workers—with the middle class in between. It is clearly the representatives of the bosses that are running the stock market and writing the economic headlines.

For the bosses, recovery means getting their sales and profits back up. For the workers, recovery means getting jobs back, getting foreclosed homes back, earning a living wage, health care and some measure of economic security.

If the working class were writing the headlines and broadcasting the network and cable news, there would be few words about impending recovery. Instead, the prime-time news would give the statistics on how this disaster is getting worse.

Jobs, housing, health care worse

In the week ending April 25, some 631,000 more workers applied for unemployment insurance, bringing the total to an all-time record of 6.27 million. All 372 metropolitan areas in the U.S. had increases in joblessness compared to a year ago. What is not mentioned is that the eligibility for unemployment insurance is so restrictive that 20 million additional workers, who are either unemployed or underemployed, are getting no benefits at all.

It is estimated that one in nine housing units—14 million in all—are vacant. A total of 803,489 properties received a default or auction notice or were seized in the first quarter, the highest since records began four years ago. (Bloomberg.com, May 4) As to the increase in purchases of existing homes—the number that helped drive up the stock market—50 percent of the purchases were by speculators picking up foreclosed homes for resale.

The crisis in unemployment has made the crisis of health care worse. It is estimated, based on U.S. Census Bureau data, that 2.4 million people have lost employer-sponsored health care since the downturn began in December 2007. Approximately 1.3 million of these losses have occurred in the last four months—more than 320,000 in March alone. (AmericanProgress.org)

The talk of recovery comes on the heels of the announcement by General Motors that it intends to lay off 47,000 workers worldwide. Some 23,000 layoffs and 13 plant closings will be in the United States. Wall Street regards it as positive news that Chrysler, under cover of bankruptcy, will close eight factories. In fact, 71 percent of CEOs are planning more layoffs in the coming six months.

It is not only the auto bosses who are shrinking industry. ArcelorMittal, the largest steel company in the world, is dismantling steel mills in Lackawanna, N.Y., and Hennepin, Ill., even though other companies want to buy both plants. Some 260 workers in Lackawanna have to stand by and watch their custom-built plant be dismantled as part of ArcelorMittal’s corporate strategy to sustain profits as steel production contracts worldwide.

There is already 25 to 30 percent unemployment in the Lackawanna-Buffalo area. The chance of getting another job anywhere near the $40,000 to $50,000 a year steelworkers were making is virtually nil. The same scenario took place in Hennepin, near Chicago, where 285 workers will be thrown out so that ArcelorMittal can ship part of the operation to Brazil and the rest to France.

These examples show what is going on with the shrinking of the U.S. capitalist economy overall. It is driven by the increasing productivity of labor. Increasing the productivity of labor is the primary way that capitalists have of increasing the exploitation of labor. It makes workers produce more in less time at the same or sometimes even lower wages. More goods must then be sold by each company at a faster rate in order to keep up profitability and pay for their technology.

This creates the crisis that is unique to capitalism: the crisis of overproduction. With high productivity of labor alongside wages that generally remain at the basic survival level under capitalism, sooner or later the working class cannot purchase what it produces and plants and stores shut down. Marxist economics explains this crisis of overproduction and its inevitability under capitalism.

Bosses are deliberately shrinking economy

This is why the bosses are now forced to shrink the economy. Take Cerberus Corp., which bought Chrysler and is now handing it over to Fiat. Last fall Cerberus, through its NewPage subsidiary, shut down a high-tech paper mill in Kimberly, Wis. According to Andy Nirschl, president of United Steel Workers Local 2-9, Cerberus wanted to raise paper prices and boost its profits by reducing capacity and throwing 600 workers out of their jobs. This was in spite of the fact that four companies wanted to buy the plant. (Dollars & Sense online, March/April, “Corporate America’s Counter-Stimulus Strategy”)

“This wasn’t like the usual scenario we’ve seen again and again,” said Nirschl, “where a corporation moves jobs to Mexico or China to increase their profits by paying less than a dollar an hour. This was a case of a corporation taking a productive, profitable plant and closing it, refusing to sell it to anyone.”

This new trend of shrinking the economy is of the greatest importance to the working class. The destruction of perfectly good factories, stores and other facilities in order to maintain profitability and deal with capitalist overproduction means that, even in the event of a stabilization of the economy or some sort of capitalist recovery, the crisis of the working class will remain.

U.S. capitalism has entered a new stage which has been masked by years of stock market and housing bubble speculation and is now obscured by the downturn. But in less-publicized news the partial truth is beginning to come out.

Bloomberg.com recently ran a piece entitled “‘Great Recession’ Will Redefine Full Employment as Jobs Vanish.” The term “Great Recession” is a quote from Paul Volcker, former head of the Federal Reserve Board, who presided over the Carter and Reagan recessions of 1980 and 1982.

The article said a new discussion is taking place on the so-called “natural” rate of unemployment based on the permanent destruction of jobs. To the workers “full employment” means everyone has a job. To the bosses, because they keep a permanent reserve army of unemployed workers at all times, full employment means millions without jobs as long as enough are working to keep the profits rolling in.

This kind of “full employment” used to mean a jobless rate of 3 percent. Then it started creeping up to 4 percent, 5 percent and so on. In the wake of the present crisis, the number is climbing steeply. Edmund Phelps, a professor at Columbia University in New York and winner of the 2006 Nobel Prize in economics, says that fallout from the recession implies a “markedly higher” rate of unemployment. “It was 5.5 percent; maybe it will be 6.5 percent, maybe 7 percent.”

Another economics professor, this one at Johns Hopkins University in Baltimore, said that unemployment may peak at 10 percent and “It will be a long time before we see 5 percent” again.

It is important to note how many times the words “may” and “maybe” are used in bourgeois economists’ projections of future “normal” unemployment. It shows that they have no way of predicting what will happen in the capitalist economy, which is unplanned and based on the anarchy of production. They see the trend in a purely pragmatic way, having no scientific theory to guide them, as do Marxists.

The number of workers who don’t ever expect to regain the same job is rising, as is long-term unemployment. Mass layoffs—those involving 50 or more workers—rose to a record 2,933 and involved 300,000 lost jobs. During the recession 257,000 auto jobs have been cut.

Lifetime wages are going to drop for the masses of workers, who will be forced to compete for low-wage jobs if the capitalists have their way. The so-called “job market,” the market of wage slaves for hire by the bosses, is going to shrink along with industry and services as a result of the laws of the capitalist profit system.

The only way to interfere with this process is for the rank and file of the working class, in alliance with their communities, to act in a concerted way to block the schemes of the bosses to make us their victims. It is time to follow the example of the Republic Windows and Doors workers in Chicago, who occupied their factory this winter after their boss tried to run away and set up a non-union plant in Iowa. The Bank of America had denied the company credit so the workers could not collect the benefits owed them.

Those workers were ready to sacrifice to win their struggle to put workers’ rights above the property rights of the owners. It is time for the rank and file of the Chrysler and General Motors workers to break up the unholy alliance of the union leaders, the government and the company that is ripping up their contracts and killing their jobs.

There is no telling where the present economic crisis is going. The bosses have plans to keep this crisis on the backs of the workers. The only answer is for the workers to organize for struggle and take their fate into their own hands.

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